"We have taken a hard look at a number of the major acquisition opportunities, but in most cases have declined to meet market pricing in an auction environment," said Linde, during a conference call Wednesday. "Investors are accepting low initial returns" when bidding, he said.

Stabilized cash yield on development projects are estimated at a "minimum of 200 and up to 500 basis points greater than the net operating income yield on acquisitions," he said.

Newly-developed properties don't require the same capital improvements as existing ones do in the first 10 years of ownership.

Boston Properties has bought lots in New York City, Washington, Waltham, Mass., and Springfield, Va., for various office buildings.

Another $452 million in development projects are currently under construction.

Still, Linde said the company is interested in acquiring properties or an entire company in Los Angeles. He's also interested in acquiring life sciences properties in Cambridge, Mass., and South San Francisco.

The company has also been selling off some properties to take advantage of strong prices. Over the past two years, the company has sold about $3.5 billion in assets. Linde expects to sell at least another $500 million in 2007. The company has made special distributions to shareholders of $7.90 over the past 15 months in connection with the property sales. However, the asset sales have lowered the company's year-over-year earnings growth.

The company has not yet decided what it will do with the proceeds from the company's pending $1.2 billion sale of 5 Times Square in Manhattan. He doesn't rule out another special dividend distribution.

All of this worked in Boston Properties' favor in 2006; the company's stock posted total returns to shareholders of 62%.

Boston Properties reported net income to common shareholders of $71.7 million in the fourth quarter, down from $154.1 million a year ago. Funds from operations, which is a common metric used to measure real estate performance, totaled $167.2 million, or $1.18 a share, up from $150.9 million, or $1.09 a share a year earlier. The FFO results exceeded Wall Street's expectations by 3 cents a share.

JP Morgan analyst Tony Paolone attributed the higher-than-expected results to better-than-anticipated rent and occupancy increases. He noted that operating income rose 3.3% in the latest quarter, exceeding the 2% increase he had expected. Occupancy at properties the company has owned at least a year rose 60 basis points to 94.7%, surpassing the 10 basis point increase Paolone had projected. Paolone doesn't hold shares in Boston Properties, and his firm has not had an investment banking relationship with the company in the past 12 months.

Linde said the company's average lease rents are $42.67 a square foot, which is $6.20 below market rates. As a result, as leases rollover, the company can move rents up significantly. In 2007, about 5.3% of the company's office leases will expire, he said.

The company raised the lower end of its 2007 FFO guidance by 5 cents a share to a range of $4.45 to $4.55 a share, up from $4.25 a share in 2006.

Morgan Stanley analyst Matt Ostrower views the company's latest results and projections positively, but said much of it is already priced into the stock.

Ostrower doesn't hold shares in Boston Properties, but his firm has had an investment banking relationship with the company in the past year.

Boston Properties' shares recently traded at $124.94 a share, up $1.14 or 0.9%, on volume of 277,400 shares compared with average daily volume of 831,555.

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